Corruption and the Bribery Bill 2009

Nowadays, in the brave new world of , monitoring is omnipresent,and few countries are bold or foolhardy enough to legislate indifferent to how such formulations will be received. Not only legislation but also policing (not just police) resources and prosecutions/regulation are under scrutiny.

The UK is used to holding its former colonies to account, but it too has been subjected to withering criticism from OECD and developing countries over its long-term failure to prosecute for transnational bribery over the last decade. It has slipped to 17th place in the TI Corruption Perceptions Index 2009 – only a few places above Barbados and St Lucia. And however much it may protest that these are only perceptions, an artefact of the media circus that surrounded the Blair-Goldsmith-SFO battle over BAE, such a fall from grace imperils its standing including among developing countries, despite a stronger actual commitment to development aid than other G8 members.

Yet few people who live in the UK (or Cayman) will ever have been subjected to the sorts of demands for bribes commonplace in many other countries, nor in general would businesspeople or lobbyists expect to hand over cash or other financial benefits for the personal enrichment of legislators.

The Bribery Bill 2009 proposes the following criminal offences

A General offence covering the offer, promise or giving of a bribe (active bribery).

A general offence covering the requesting, agreeing to receive or acceptance of a bribe (passive bribery).

A discrete offence of bribing a foreign public official to obtain or retain business.

An offence based on the failure by a commercial organisation to prevent bribery by persons acting on its behalf.

The corporate offence is restricted to instances of active bribery on the part of a person associated with the business with the intention to secure or retain business. The offence is coupled with an ‘adequate procedures’ defence which would allow the company on behalf of which a bribe has been paid to avoid a conviction if it can show that it has adequate procedures in place to prevent bribery despite this actual bribe.

What counts as ‘adequate procedures’ in practice is the $64 million question, and it is this – alongside the concern that other countries will create an unlevel playing field by softer legislation and/or lower enforcement – that is giving both corporate executives and their financial and professional advisers some anxiety.

Prior to the current Bribery Bill 2009, the UK received heavy criticism from the OECD Working Group on Transnational Bribery – especially over the non-prosecution of BAE for the Saudi contracts (decisions on other alleged bribes are pending as I write) – but it would be a mistake to suggest that this was the only source of motivation to reform our corruption laws. Such a need had been felt in the 1990s and arose not from the sense that the UK was a deeply corrupt society – which it is not – but from the judgment that it was too difficult to prove serious corruption cases domestically and that the law was defective.

The Law Commission reported in 1998; a joint Committee of Parliament considered the Government Draft Corruption Bill 2003, but there was criticism particularly of the retention of the agent /principal construct of the proposed offence and the Bill was dropped due to lack of support. The most notable scandal was the failure of the prosecution in the Jubilee Line case in 2005, reportedly at a cost of £60 million, which sum would have funded massive much-needed improvements in the London Underground3. There followed successive government and Law Commission papers in 2005, 2007 and 2008. So reform has been a long time coming.

What is proposed and what is likely to be the impact?

The Regulatory Impact Assessment – normally taken more seriously in the UK than in a European Parliament context – assesses the cost implications as fairly neutral, not quantifying the business compliance costs. It states that: “initial one-off familiarisation costs will be relatively small scale. There might also be one-off business compliance costs from upgrading internal accounting and auditing systems, but as bribery is already a criminal offence these costs should be manageable. Ongoing government enforcement costs from one contested SFO prosecution every year (approx £2m, though £0.5m would be recovered through civil recovery procedures); one contested CPS prosecution every three years (approx £0.3m per year); and court costs (£0.3m per year).”

This is not suggestive of a Jihad against bribery. The benefits, as often is the case with enforcement in the financial crime area, are harder to assess and are stated to be: “Savings to UK businesses from no longer paying bribes. Improved reputation for UK.” Note the absence of reference to costs to UK business from lost contracts from no longer paying bribes overseas!

At a policy level, this is a modernisation project to clearly and with certainty address bribery by UK persons or companies which takes place at home or abroad. “At the same time the law should be flexible and sophisticated enough to differentiate between bribery and legitimate business practices, such as corporate hospitality….The Government has a specific objective of combating the use of bribery in high value transactions in international markets – in particular in large scale public procurement or similar tendering exercises in which predominantly only the largest businesses operate. The new corporate offence is intended to apply in these cases.”

Human rights

Human rights have become an important issue not just for those on the political left of centre but also for those tasked with defending corporate bribery and those asked to provide mutual legal assistance in cases, eg in relation to where the funds were allegedly ‘laundered’. The UK government considers that the provisions of the Bill are fully compatible with the European Convention on Human Rights. Let us look at this in greater detail.

Failing to prevent bribery

Clauses 7 and 8 would make it an offence for a commercial organisation to fail to prevent a person performing services for or on its behalf from committing certain bribery offences. That person must intend to obtain or retain business, or an advantage in the conduct of business, for the organisation. It would be a defence to a charge under this provision for the organisation to prove that it had in place adequate procedures designed to prevent such persons committing bribery offences. In relation to clause 7(2), the defendant organisation would have to prove – on a balance of probabilities – that the defence actually applies.

Article 6(2) of the Convention requires that every person charged with a criminal offence shall be presumed innocent until proved guilty according to law. Case law has established that, while placing a legal burden in relation to a defence on the defendant may call into question that general proposition that will be compatible with the Convention, where the overall burden of establishing guilt remains with the prosecution and the burden is otherwise reasonable and proportionate.

The aim of the offence is to encourage commercial organisations to take responsibility for the actions of persons performing services for them or on their behalf, without necessarily active instructions from directors, where those actions are undertaken for the benefit of that organisation. Where the prosecution can show that an offence has in fact been committed by a person for the benefit of the organisation, then the burden shifts to the organisation, which will be liable unless it can show that despite the instant case of bribery it generally had adequate procedures in place which, on the whole, are successful in preventing bribery.

The government argues that this is both reasonable and proportionate. The procedures an organisation has in place to prevent bribery being employed on its behalf are within its own knowledge and control. The organisation will have ready access to the information needed to establish the existence of the defence and there would be no absolute requirement to prevent bribery. The defence was proposed by the Law Commission, which took the view that the legal burden ought properly to be placed on the defendant organisation.

So what will happen if the Bill becomes law? The prosecution must first prove to the criminal standard that a bribe was paid for the benefit of the organisation. Only once that direct link to the organisation has been made would the burden (on the civil standard) transfer to the defendant. It is open to a defendant organisation to bring in evidence which shows that given the size of the organisation, the particular sector or country in which it operated and the foreseeable risks, its procedures employed to prevent bribery being committed on its behalf were adequate even if they were not successful on this occasion. Courts will presumably take expert evidence on what is custom and practice in the industry sector, and also admit evidence on procedures and what steps the company took to educate and implement them.

Defence for certain bribery offences: legitimate purposes

Clause 12 of the Bill provides for a defence to certain bribery offences where it can be shown that the conduct which would amount to an offence was necessary for:

the prevention, detection or investigation by, or on behalf of, a law enforcement agency of serious crime,

the proper exercise of any function of the Security Service, the Secret Intelligence Service or GCHQ, or

the proper exercise of any function of the armed forces when engaged on active service.

This is to provide a legal excuse for surveillance and ‘sting’ operations by the authorities. As for the defence relating to commercial organisations (clause 7) the legal burden to prove the conduct was necessary shifts to the defence once it is established that an offence has been committed. The overall burden of establishing guilt remains with the prosecution, though on a balance of probabilities, not ‘proof beyond reasonable doubt’. The defence is expressly limited to cases where there is a compelling need to undertake such operations.

Unlike the Corporate Manslaughter and Corporate Homicide Act 2007 which severed common law corporate liability from the new statutory offence, the Bribery Bill retains it as a route to liability. The government rejected the Australian Criminal Code scheme which supplements the identification (with company policy and senior official) route for mens rea offences with the corporate culture model. It also rejected vicarious liability with a due diligence defence and a broader version of failure to prevent the offence. Though it does make some significant steps forward the Bill risks alienating both the fearful business community and the OECD.

Michael Levi has been conducting international research on the control of white-collar and organised crime, corruption and money laundering since 1972. He has published widely on these subjects and edited major journals, including Criminology and Criminal Justice, the official journal of the British Society of Criminology.

Dr. Michael LeviProfessor of Criminology Cardiff University School of Social SciencesGlamorgan BuildingKing Edward VII AvenueCardiffCF10 3WT

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